Tapestry Shares Soar as Analyst Calls Stock Too Cheap

Shares of Tapestry, the parent company of Kate Spade and Coach, were soaring 9% on Wednesday after Deutsche Bank upgraded the stock and said shares had gotten too cheap.

This year the stock has falling 32%.

According to Deutsche analyst Paul Trussell, the selloff this year has gone too far. He increased his rating on Tapestry to Buy and added $3 to his price target, taking it from $18 to $21 on Wednesday.

Trussell expects the company will see a faster-than-expected recovery in sales, led by North America and China.

The analyst wrote that “long appreciated Tapestry’s robust international growth engine, Coach’s merchandising strength, and growing ready-to-wear, footwear, and men’s businesses.”

Trussell thinks Tapestry has done a good job managing expenses and believes there is more room for the valuation to expand.

“We have seen better than expected results across a number of retailers as pent-up demand, stimulus checks, demand for larger handbags/backpacks and casual footwear and clothing, and consumers’ use of the digital channel aided a sequential rebound,” he added.

The company last reported quarterly earnings data on Thursday, August 13th, revealing ($0.25) earnings per
share (EPS) for the quarter, topping the consensus estimate of ($0.55) by $0.30. Tapestry had a negative net margin of 13.14% and a positive return on equity of 9.65%. During the same period last year, the company earned $0.61 earnings per share. On average analysts are expecting that the company will post 1.84 EPS for the current fiscal year.

At the time Interim CEO Joanne Crevoiserat stated, “I’m incredibly proud of our team’s passion, resilience and focus during these unprecedented times. Our people are the key to our future success. And I’m confident that we will continue to execute at a high level as we move forward.”

“Further, I’m convinced that Tapestry’s ability to weather the challenges over the past few months is due in part to our culture of embracing diversity. We have always strived to contribute to a world that is inclusive. We understand that we are better together when different voices, life experiences and perspectives allow us to develop entirely new ideas, solutions and products. This principle drive everything that we do and it is embedded in the DNA of our company and in each of our brands.”

Disclaimer: We have no position in Tapestry Inc. (NYSE: TPR) and have not been compensated for this article.